This question has graphs that you need to construct as part of your answer. Please go to this site to make your graphs:https://www.draw.io/Start with a basic diagram and add in all the parts needed to make the correct graph for your answer. When you're done, save your work or take a screenshot and then attach the image file to the test question here before moving on.

Before you finish, check your work!

• Are the horizontal and vertical axes labeled correctly?
• Does every line have a label?
• Are shifts shown with directional arrows?
• Did you show changes in equilibrium points by labeling new one and showing changes in levels on the axes?

Bell Cell is the only supplier of cell phones, offering a wide range of models to its customers. Bell Cell is an unregulated firm and is currently earning an economic profit. Assume that Bell Cell does not practice price discrimination.

(a) Draw a correctly labeled graph for Bell Cell and show each of the following.

• (i) The profit-maximizing quantity of cell phones, labeled as Q*
• (ii) The profit-maximizing price, labeled as P*
• (iii) The area of economic profit, completely shaded
• (iv) The socially optimal level of cell phone production, assuming no externalities, labeled as QS

(b) Assume that the government grants Bell Cell a lump-sum subsidy of $1 million. Will this policy change Bell Cell's profit-maximizing quantity of cell phones? Explain.

(c) Instead of granting a subsidy, assume now that the government chooses to require Bell Cell to produce the quantity at which Bell Cell earns zero economic profit. On the graph you drew in part (a), label this quantity QR.

(d) At QR, is the firm's accounting profit positive, negative, or zero? Explain.

(e) Assume that a new study reveals there are external benefits associated with using a cell phone. Will the socially optimal quantity of cell phones now be larger than, smaller than, or equal to the QS you identified in part (a)(iv)?